As an employee, one of the benefits you stand to gain from your employer is a benefit in kind (BIK). In those days, BIK applied to middle and top-level managers. However, this is no longer the case. You may see a gateman staying in an accommodation provided by his employer. Some entities might have a staff quarter for their staff. In this article, we explain the benefit-in-kind and how employees can utilize them effectively.
What's the benefit in kind
It is referred to as a non-monetary compensation given to employees to enable them carry out their role as well as to keep them motivated. It is called in-kind because it is as if the company is doing the employee a favour. BIK is a form of staff motivation and could improve productivity.
In the Nigeria Tax Act, 2025 benefit in kind is measured based on a percentage, the cost of the property, or the actual market value. BIK is added to arrive at gross salary/income.
Benefit in kind examples
A popular BIK is accommodations and official cars given to middle and top-level managers. Other forms of BIKs are children's school fees, a gateman, a driver, a gardener, and a chief. If the company provides this act of kindness to the employee.
Some BIKs are not taxable. For example, if the employer provides safety and work equipment such as mobile phones and computers, canteen meals, and relocation expenses then this kindness is not taxable by the relevant tax authority.
How to calculate benefit in kind
As stated above, benefits in kind are part of the gross emoluments of an employee. Its computation depends on how the benefit is given to the employee.
BIK in asset form
When an asset-form BIK is provided to the employee, a 5% of the cost of the asset is the annual benefit in kind. BIKs in asset form are primarily official motor cars and apartments. If the cost of the car cannot be ascertained, according to NTA, 2025, then it is 5% of the current market value of the car.
BIK in payment form
When the employer makes a payment for an activity on behalf of the employee, the actual amount spent becomes the BIK. For example, if the employer pays for the accommodation, the annual rent paid is a benefit in kind. BIK for childcare provision, driver, Gardener, among others are on the actual amount paid.
Why employees should be concerned with BIK
When comparing salary structures from two or more companies' offer letters, the employee must understand the BIK element. And ensures that it favours him or her. Arbitrarily accepting BIK from an organisation will result in higher tax payments. This will reduce disposable income.
Therefore, the BIK amount should be reasonable. It should not be so high that it impacts disposable income. For example, Mr Tosin's net pay might be 3 million Naira per month with accommodation and an official car. Whereas, Mr Olamide who enjoys the same BIK earns a net monthly salary of 600,000 Naira.
For example, the benefit in kind may include an official car whereas the employee owned a car. A BIK may provide for children's school fees. But the school fees paid for the children are less expensive compared to the amount to be paid by the employer.
In a nutshell, it is necessary to carry out the computation of the BIK and the net monthly salary. This should be done by the employee to prevent paying more taxes than they should as a result of unnecessary BIK.